Homebuilders are exploring more cost effective combined space and water heating systems (combo systems) with major water heater manufacturers that are offering pre-engineered forced air space heating combo systems. In this project, unlike standardized tests, laboratory tests were conducted that subjected condensing tankless and storage water heater based combo systems to realistic, coincidental space and domestic hot water loads with the following key findings: 1) The tankless combo system maintained more stable DHW and space heating temperatures than the storage combo system. 2) The tankless combo system consistently achieved better daily efficiencies (i.e. 84%-93%) than the storage combo system (i.e. 81%- 91%) when the air handler was sized adequately and adjusted properly to achieve significant condensing operation. When condensing operation was not achieved, both systems performed with lower (i.e. 75%-88%), but similar efficiencies. 3) Air handlers currently packaged with combo systems are not designed to optimize condensing operation. More research is needed to develop air handlers specifically designed for condensing water heaters. 4) System efficiencies greater than 90% were achieved only on days where continual and steady space heating loads were required with significant condensing operation. For days where heating was more intermittent, the system efficiencies fell below 90%.